Modular homes. Is a modular home a manufactured home for purposes of Regulation C?

Answer: For Regulation C reporting, a manufactured home is one that meets the HUD code, 12 CFR 203.2(i). The official staff commentary indicates that modular homes that are ready for occupancy when they leave the factory and meet all of the HUD code standards are included in the definition of "manufactured home". 203.2(i)-1. The comment, and a prior FAQ on this site, have raised questions about whether a modular home should be reported as a manufactured home or as a one- to four-family dwelling. Until the Board provides further guidance regarding modular homes, lenders may, at their option, report a modular home as either a one- to four-family dwelling or as a manufactured home.

- This FAQ supersedes the prior FAQ on modular homes posted in December 2003.

Conditional approvals---customary loan-commitment or loan-closing conditions. The commentary indicates that an institution reports a "denial" if an institution approves a loan subject to underwriting conditions (other than customary loan-commitment or loan-closing conditions) and the applicant does not meet them. See comment 4(a)(8)-4. What are customary loan-commitment or loan-closing conditions?

Answer: Customary loan-commitment or loan-closing conditions include clear-title requirements, acceptable property survey, acceptable title insurance binder, clear termite inspection, and, where the applicant plans to use the proceeds from the sale of one home to purchase another, a settlement statement showing adequate proceeds from the sale. See comments 2(b)-3 and 4(a)(8)-4. An applicant's failure to meet one of those conditions, or an analogous condition, causes the application to be coded "approved but not accepted." Customary loan-commitment and loan-closing conditions do not include (1) conditions that constitute a counter-offer, such as a demand for a higher down-payment; (2) underwriting conditions concerning the borrower's creditworthiness, including satisfactory debt-to-income and loan-to-value ratios; or (3) verification or confirmation, in whatever form the lender ordinarily requires, that the borrower meets underwriting conditions concerning borrower creditworthiness.

Conditional approvals---failure to satisfy creditworthiness conditions. How should a lender code "action taken" where the borrower does not satisfy conditions concerning creditworthiness?

Answer: If a credit decision has not been made and the borrower has expressly withdrawn, use the code for "application withdrawn." That code is not otherwise available. See Appendix A, I.B.1.d. If the condition involves submitting additional information about creditworthiness the lender needs to make a credit decision and the applicant has not responded to a request for the additional information in the time allowed, use the code for "file closed for incompleteness." See Appendix A, I.B.1.e. If the borrower has supplied the information the lender requires for a credit decision and the lender denies the application or extends a counter-offer that the borrower does not accept, use the code for "application denied." If the borrower has satisfied the underwriting conditions of the lender and the lender agrees to extend credit but the loan is not consummated, then use the code for "application approved but not accepted."

For example, if approval is conditioned on a satisfactory appraisal and, despite notice of the need for an appraisal, the applicant declines to obtain an appraisal or does not respond to the lender's notice, then the application should be coded "file closed for incompleteness." If, on the other hand, the applicant obtains an appraisal but the appraisal does not support the assumed loan-to-value ratio and the lender is therefore not willing to extend the loan amount sought, then the lender must use the code for "application denied."

Refinancing --- coverage vs. reporting. Why are there two definitions of "refinancing," one for "coverage" and one for "reporting"?

Answer: A lender uses the reporting definition, 203.2(k)(2), to determine whether to report a particular application, origination, or purchase as a "refinancing" in the loan purpose field; a lender uses the coverage definition, 203.2(k)(1), to determine whether the institution has sufficient home purchase loan activity, including refinancings of home purchase loans, for the institution to be covered by HMDA.. See 203.2(e)(1)(iii), 203.2(e)(2)(i) and (iii). The coverage definition is not relevant to determining whether to report a particular transaction as a refinancing.

Refinancing --- loan purpose. If an obligation satisfies and replaces another obligation, is the purpose of the replaced obligation relevant to whether the new obligation is a reportable "refinancing" under Regulation C?

Answer: No. The new definition of a reportable refinancing looks only to whether (1) an obligation satisfies and replaces another obligation and (2) each obligation is secured by a dwelling. See 203.2(k)(2). Thus, for example, a satisfaction and replacement of a loan made for a business purpose is a reportable refinancing if both the new loan and the replaced loan are secured by a dwelling.

Refinancing --- line of credit. If a dwelling-secured line of credit satisfies and replaces another dwelling-secured obligation, is the line required to be reported as a "refinancing"?

Answer: No. A dwelling-secured line of credit that satisfies and replaces another dwelling-secured obligation is not required to be reported as a "refinancing," regardless of whether the line is for consumer or business purposes.

Refinancing --- guaranty secured by dwelling. If an obligation secured by a dwelling is satisfied and replaced by an obligation in which a guaranty of the credit obligation is secured by a dwelling but the new credit obligation is not secured by a dwelling, is the transaction reportable under HMDA?

Answer: No, a transaction is not reportable as a home purchase loan or refinancing unless the credit obligation, itself, is secured by a dwelling. See 203.2(h), 203.2(k)(2). An obligation not secured by a dwelling is reportable as a home improvement loan only if classified by the lender as a home improvement loan. See 203.2(g)(2).

Refinancing --- satisfaction of lien. Is the satisfaction of a lien (mortgage) relevant to determining whether an obligation is a reportable refinancing?

Answer: No, the satisfaction of a lien is neither necessary nor sufficient to create a reportable refinancing. The credit obligation must be satisfied and replaced; it is not relevant whether the lien is satisfied and replaced. See 203.2(k)(2)

Refinancing --- cash out for home improvement. How should a lender code a dwelling-secured loan when the borrower uses the funds both to pay off an existing dwelling-secured loan and to make improvements to a dwelling?

Answer: A dwelling-secured loan that meets the definitions of both "home improvement loan" and "refinancing" should be coded as a "home improvement loan."See comment 203.2(g)-5. The lender must code the loan as a "home improvement loan" even if the lender does not classify it in the lender's own records as a "home improvement loan." See 203.2(g)(1).

MECAs. Should MECAs (Modification, Extension and Consolidation Agreements) be reported under HMDA as refinancings?

Answer: No. The rule is unchanged: MECAs are not reportable as refinancings under Regulation C. See 67 Fed. Reg. 7221, 7227 (Feb. 15, 2002). The applicable comment was inadvertently omitted when the Commentary was revised in 2002; the comment will be restored when the Commentary is next revised.

Temporary Financing. When is a loan "temporary financing" such that it is exempt from reporting?

Answer: The regulation lists as examples of temporary financing construction loans and bridge loans. See 203.4(d)(3). Construction and bridge loans are illustrative, not exclusive, examples of temporary financing. The examples indicate that financing is temporary if it is designed to be replaced by permanent financing of a much longer term. A loan is not temporary financing merely because its term is short. For example, a lender may make a loan with a 1-year term to enable an investor to purchase a home, renovate it, and re-sell it before the term expires. Such a loan must be reported as a home purchase loan. See 203.2(h).

Reverse Mortgage---reporting. Does a lender have to report information on applications and loans involving reverse mortgages?

Answer: Reverse mortgages are subject to the general rule that lenders must report applications or loans that meet the definition of a home purchase loan, home improvement loan, or refinancing (see 12 C.F.R. § 203.2(g)-(h), (k)).

Note, however, that reporting is optional if the reverse mortgage (in addition to qualifying as a home purchase loan, home improvement loan, or refinancing) is also a home equity line of credit (HELOC). See 12 C.F.R. § 203.4(c)(3). The official staff commentary to Regulation C states that a lender who opts to report a HELOC should report in the loan amount field only the portion of the line intended for home improvement or home purchase. See comment 4(a)(7)-3.

Program---In general. An element of the definition of "preapproval request" is the existence of a "program." How is it determined whether a program exists?

Answer: A preapproval program exists when the procedures established and used by the lender match those specified in 203.2(b)(2). A program, regardless of its name, is not a "preapproval program" for purposes of HMDA if the program does not meet the specifications in the regulation. By the same token, a program may be a preapproval program for purposes of HMDA even though it is not so named. The question is whether the lender regularly uses the procedures specified in the regulation. If a lender has not established procedures like those specified in the regulation, but considers requests for preapproval on an ad hoc basis, those requests need not be treated as requests for preapproval under HMDA. Failure to establish and consistently follow uniform procedures, however, may raise fair-lending and safety-and-soundness issues.

Program---Commitment letter issued on request. If a lender issues a commitment letter only at the applicant's request, does the lender have a preapproval program?

Answer: If a lender will as a general matter issue written commitments under the terms and procedures described in 203.2(b)(2), then the lender has a preapproval program regardless whether the lender gives a written commitment to all applicants who qualify for preapproval or only to those qualifying applicants who specifically ask for a commitment in writing.

Preapproval request approved and accepted, but loan not originated. How should a lender report a preapproval request it has approved where the borrower subsequently identified a property to the lender but a loan was not originated?

Answer: When a borrower who has received a written commitment in response to a preapproval request identifies a property to the lender but the loan fails to originate, in the "type of action" field the lender must record the reason for the failure of the loan to originate --- whether the reason is that the application was later withdrawn, was denied at a later stage, was determined later to be incomplete, or was approved but not accepted. Neither code '7' ("preapproval request denied") nor code '8' ("preapproval request approved but not accepted") should be used, as the application has passed the preapproval stage. In the "request for preapproval" field, code '1' (preapproval was requested) must be used. See Appendix A, I.A.8. & I.B.1.

For example: (1) an applicant submits a request for approval, (2) the request is granted in the form of a written commitment containing only the conditions specified in the regulation, (3) the applicant identifies a property, (4) the appraisal is less than the borrower anticipated and the lender is not willing to lend the amount stated in the commitment letter, and (5) the lender counteroffers with a lower loan amount but the borrower does not accept. In these circumstances, the lender would use code '3' in the "type of action" field ("application denied by financial institution") and code '1' in the "request for preapproval" field ("preapproval was requested").

Preapproval request approved but no property identified. How should a lender report a preapproval request it approved if the borrower did not later identify a property to the lender?

Answer: Reporting of the transaction is optional. If the transaction is reported, the lender uses code '8' ("preapproval request approved but not accepted") under "type of action" and code '1' ("preapproval was requested") under "request for preapproval." See Appendix A, I.A.8. & I.B.1.

Loan amount---preapproval request approved but not accepted. What loan amount should be entered if a preapproval request is approved but not accepted and the lender opts to report the transaction?

Answer: If the applicant requested approval for a specific loan amount, enter that amount unless the lender approved the applicant for a higher amount, in which case, enter that higher amount. If the applicant did not request approval for a specific loan amount, enter the amount stated on the commitment letter.

Hispanic ethnicity. If an applicant self-identifies as "Hispanic or Latino" under the category of "Ethnicity," what options under "Race" are available?

Answer: The applicant should be asked to identify a race or races from among the five choices available. See question below on Definitions of races and Hispanic ethnicity. If a lender is face-to-face with an applicant who (1) has self-identified as "Hispanic or Latino" (or whom the lender has identified as of that ethnicity because the applicant has declined to self-identify) and (2) has not identified a race, the lender must identify whatever race or races the lender believes apply, based on surname and visual observation. In those circumstances, the lender may not indicate "NA" in the race field. "NA" is used in the race field only if (1) the applicant is not a natural person, (2) the HMDA reporter has purchased, not originated, the loan, or (3) an application taken in 2003 reached final action in 2004 (see comment 203.4(a)(iv)(B)(3)).

Definitions of races and Hispanic ethnicity. Where can one find definitions of the five races and Hispanic ethnicity?

Answer: The Office of Management and Budget has adopted definitions of the five races and Hispanic ethnicity. They can be found at http://www.whitehouse.gov/omb/fedreg_1997standards/. OMB's definitions may be offered to the applicant as an aid, but the choice of how to self-identify is entirely the applicant's.

Telephone applicant declines to provide race, ethnicity or sex. If an applicant declines to provide the race, ethnicity, or sex in an application taken entirely by mail, Internet, or telephone, should the lender attempt to identify the missing information --- for example, based on the applicant's voice or surname?

Answer: No. If an application is taken entirely by mail, Internet, or telephone, and the applicant declines to provide information on ethnicity, race, or sex, the lender must use the code for "information not provided by applicant in mail, Internet, or telephone application."

Collection of partial information. When collecting government monitoring information (ethnicity, race, sex), must a lender permit an applicant to choose to fill in only one or two, rather than all three, of the fields?

Answer: Yes. A lender must permit an applicant to choose to fill in only one or two of the three fields. For example, a Web-based application should not compel the applicant to choose between making selections in each of the three fields and declining to make any selections whatsoever. Unless the applicant clearly indicates the applicant declines to supply any information, the applicant must be given the opportunity to supply any part of the information the applicant chooses.

Reporting of partial information. If an applicant chooses to make selections in one or two, but not all three, fields (ethnicity, race, sex), must the lender report the partial information?

Answer: Yes. A lender must report whatever information the applicant supplies, whether partial or complete. For example, if, on an application submitted by mail, an applicant marks a box indicating the applicant does "not wish to furnish" government monitoring information but supplies some or all of the information, the lender must report the information supplied.

Three do-not-wish-to-furnish boxes. The sample data collection form in Appendix B contains, for each applicant, one box for the applicant to indicate "I do not wish to furnish this information." In place of one box for all three fields (ethnicity, race, sex), may a lender place a do-not-wish-to-furnish box in each of the three fields?

Answer: Yes. A lender may place a box indicating "I do not wish to furnish this information" under each of the three field titles (ethnicity, race, sex) instead of a do-not-wish-to-furnish box that applies to all three fields as a group. Similarly, in a telephone application a lender may wait to read the do-not-wish-to-furnish option until the lender has reviewed the selections in each field, or the lender may decline altogether to state that option expressly so long as (a) the applicant is clearly informed that providing the information, though encouraged, is not required, and (b) if the applicant declines to provide any part of the information, the lender so indicates.

Pre-2004 use of revised categories. May a lender use the revised race and ethnicity categories to collect monitoring information before January 1, 2004?

Answer: The revised ethnicity and race categories take effect for applications received on or after January 1, 2004. A lender should not use the revised categories for collecting HMDA data before that date, unless the lender is certain that the application will not receive final action until 2004 (e.g., because it was received on December 30, 2003). See comment 203.4(a)-4(iv). Using the revised categories for applications received in 2003 could result in reporting errors on the 2003 HMDA Loan Application Register (HMDA LAR).

Post-2003 use of old race/national origin categories. In 2004, may a lender take an application using an application form containing the old race and national origin categories?

Answer: No, after 2003 a lender must use application forms with the revised race and ethnicity categories. A lender may not, for example, use application forms with the old categories to exhaust its supply of forms. If a lender provides a consumer an application form with the old categories in 2003, the completed form is dated in 2003, and the lender receives the application in 2004, the lender may use conversion rules published with the transition guidance. Lenders and brokers are responsible for ensuring, however, that application forms provided to consumers on and after January 1, 2004, contain the revised categories.

Use of Board-published average prime offer rates. May a lender use average prime offer rates other than those in the Board's tables?

Answer: Yes. A lender may use either the average prime offer rates published by the Board or may determine average prime offer rates by employing the methodology published on the FFIEC web site with the tables. A lender that determines average prime offer rates for itself, however, bears the risk of liability for incorrect calculations.

Brokered loans --- rate set date. What date is the rate considered to be "set" when an investor that makes a credit decision prior to closing, and thus has reporting responsibility for a loan, originates the loan through a broker, as discussed in staff comment 1(c)-2?

Answer: The last date the investor set the rate with the broker, not the date the broker set the borrower's rate.

Balloon loans --- rate spread. If the amortization period of a loan is longer than the term to maturity or the initial, fixed-rate period, as applicable, (the "term") of the loan - i.e., because the loan has a balloon feature - should the lender use the term or the amortization period in determining the applicable average prime offer rate?

Answer: The term must be used. See 203.4(a)(12). For example, in the case of a fixed-rate loan that has term to maturity of five years and has a balloon payment because the payments are amortized over 30 years, the term of five years must be used. In the case of a variable-rate loan that has a term to maturity of 30 years and whose rate is fixed for five years and then adjusts annually over 25 additional years, the term of five years must be used.

Change in loan program --- rate set date. What date is the rate considered to be "set" when a lender issues a rate-lock commitment under one loan program, the consumer subsequently changes to another program that is subject to different pricing terms, and the lender changes the rate promised to the consumer under the rate-lock commitment accordingly?

Answer: Except as provided in the following sentence, the date of the program change is the date the rate is set. If the lender changes the promised rate to the rate that was available under the new program on the date of the original rate-lock commitment, that is the date the rate is set - provided the lender consistently follows this practice in all such cases or the original rate-lock agreement so provides.

Loan term --- rate spread. What term should a lender use to find the average prime offer rate for a comparable transaction when the loan's term to maturity (or, for an adjustable-rate loan, the initial fixed-rate period) is not in whole years?

Answer: The lender should use the number of whole years closest to the actual term; if the actual term is exactly halfway between two whole years, the lender should use the shorter of the two. For example, for a loan term of 10 years and three months, enter in the rate spread calculator (or choose the column of the appropriate average prime offer rate table corresponding to) 10 years; for a loan term of 10 years and nine months, enter (or choose the column for) 11 years; for a loan term of 10 years and six months, enter (or choose the column for) 10 years. If a loan term includes an odd number of days, in addition to an odd number of months, the lender first should round to the nearest whole month, again rounding down if the number of odd days is exactly halfway between two months.

Private securitization. When should code 5 for "private securitization" be used?

Answer: Code '5' is to be used for securitizations by purchasers other than by one of the government-sponsored enterprises identified in codes '1' through '4'. If an institution selling a loan knows or reasonably believes that the loan will be securitized by the institution purchasing the loan, then the seller should use code '5' for "private securitization" regardless of the type or affiliation of the purchasing institution. Reasonable belief or knowledge could, for example, be based on the purchase agreement or other related documents, the institution's previous transactions with the purchaser, or the purchaser's role as a securitizer (such as an investment bank). If an institution selling a loan does not know whether the purchaser will securitize the loan, and, the seller knows that the purchaser frequently holds or disposes of loans by means other than securitization, then the seller should use one of codes '6' through '9', depending on the nature of the purchaser.

Answer: A "mortgage bank," often referred to as a mortgage company, means, for these purposes, a non-depository institution that purchases mortgage loans and typically originates such loans. A "mortgage bank" might be an affiliate or a subsidiary of a bank or thrift holding company or it might be an independent mortgage company. In either case, use code '7' - unless the purchaser is an affiliate of the seller, itself, in which case use code '8'.

Subsidiaries of depository institutions. How should a sale to a subsidiary of a depository institution be coded?

Answer: Use code '6' if the subsidiary is, itself, a depository institution (a commercial bank, savings bank, or savings association). If the subsidiary is not a depository institution, such as a mortgage company or finance company, use code '7'. If the subsidiary is an institution of a type other than the types identified in codes '6' and '7', however, use code '9.' Notwithstanding the foregoing, if the subsidiary is an affiliate of the seller, itself, then use code '8'.

Reverse Mortgages --- HOEPA Status. If a lender reports an application or loan for a reverse mortgage, should a lender report HOEPA status?

Answer: Reverse mortgages are not subject to the Home Ownership and Equity Protection Act of 1994 (HOEPA). See 15 U.S.C. § 1602(aa)(1). Therefore, a lender should enter the code for “not applicable” for HOEPA status.